JPMorgan Chase CEO Jamie Dimon warned this week that there could be credit risks lurking in the economy, saying that “when you see one cockroach there are probably more.”
Dimon spoke on the bank’s quarterly earnings call on Tuesday and acknowledged that the firm had to take a $170 million write-off in the third quarter related to the bankruptcy of subprime auto lender and dealership Tricolor.
He also pointed to the bankruptcy of auto parts maker First Brands as suggesting there could be some other credit problems looming in the economy.
“When you see one cockroach, there are probably more, and so everyone should be forewarned of this one,” Dimon said. “First Brands, I’d put in the same category, and there are a couple of other ones out that I’ve seen put in similar categories. We always look at these things, and we’re not omnipotent – we make mistakes too.”
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“We’ve had a credit bull market now for the better part of since 2010,” Dimon added. “These are early signs there might be some excess out there because of it. If we ever have a downturn, you’re going to see quite a few more credit issues.”
Dimon said that JPMorgan is reviewing its controls after the Tricolor bankruptcy and said the $170 million loss is “not our finest moment.”
“When something like that happens, you can assume that we scour every issue, every universe, everything about how it could be taking place to make sure it doesn’t take place from here,” Dimon said.
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“You can never completely avoid these things, but the discipline is to look at it in cold light and go through every single little thing, which you can imagine we’ve already done,” he added.
First Brands is under investigation by the Justice Department’s Office of U.S. Trustees, which oversees bankruptcy matters.
The group said in a Wednesday court filing that there are “ample grounds to suspect that current members of the debtors’ boards or executive management team may have engaged in actual fraud, dishonesty, or criminal conduct in the management of the debtors’ business affairs.”
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Reuters contributed to this report.
